Uganda’s household spending levels under strain

Monday January 1 2018

A vegetable vendor counting his takings at a

A vegetable vendor counting his takings at a market in Kampala. More than eight million Ugandans live below the poverty line out of a total population projected at 37.7 million people by end of 2017, according to government data. PHOTO FILE | NATION 

By BERNARD BUSUULWA
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Household expenditure, a key measure of consumer demand, has slowed down over the past two years under pressure from weak economic growth rates experienced in Uganda.

The latest data published by Bank of Uganda shows total household expenditure dropped from Ush40,003 billion ($11 billion) in 2014/15 to Ush39,900 billion ($10.9 billion) in 2015/16. At the end of 2016/17, it stood at Ush41,062 billions ($11.3 billion).

While annual household expenditure grew by 11.3 per cent in 2014/15, it declined by 0.3 per cent in 2015/16 — an outcome attributed to low government spending, budget cuts reported among businesses worried about the impact of the 2016 general elections on their operations and cases of capital flight by jittery foreign investors.

Annual household expenditure slightly rose by 2.9 per cent in 2016/17, reflecting constrained family budgets and signs of hardship faced by many households struggling to meet living expenses.

Consumption of goods and services by households directly stimulates production output recorded by firms, tax collections, job creation and demand for credit among local businesses eager to expand and increase production levels, economists say.

Major sources of household income include government expenditure, personal savings and overseas remittances supplied by Ugandans working abroad.

Poverty levels

Weak household spending usually translates into high poverty levels, rising crime rates and increased risks of political unrest within distressed segments of the population, experts say.

More than eight million Ugandans live below the poverty line out of a total population projected at 37.7 million people by end of 2017, according to government data, but the latest statistics on local crime rates were not immediately available.

In comparison, economic growth rates appear subdued during the period under review. Whereas economic growth stood at 5.2 per cent in 2014/15, it declined to 4.7 per cent and four per cent in 2015/16 and 2016/17 respectively, according to the BoU.

The modest recovery posted in household spending patterns during 2016/17 is partly attributed to a surge in imports captured since the beginning of this year.

Total private sector imports grew by $74.7 million during August-October 2017, comprising of oil and non-oil products while the country’s current account deficit expanded from $303.9 million to $520.1 million, reflecting spillover effects from rising import volumes.

“Overall imports of goods and services grew by 14 per cent by end of October 2017 and increased by 10 per cent between January and July 2017.

With GDP growth projected in the range of 5-5.5 per cent in 2017/18 and associated growth in agricultural incomes, HH expenditure is projected to grow by 6 per cent in FY 2017/18,” said Dr Adam Mugume, the BoU’s executive director for research.

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